Contractors face greater scrutiny from anti-DEI executive orders
![President Trump shows off a recently signed executive order on this first day in office.](https://cdn.washingtontechnology.com/media/img/cd/2025/01/24/TrumpEOWT20250124/860x394.jpg?1737742413)
President Trump shows off a recently signed executive order on this first day in office. Gettyimages.com/ Anna Moneymaker / Staff
President Trump’s actions come with enforcement provisions that encourage employees to report on their companies.
President Trump’s slate of executive orders targeting diversity, equity and inclusion programs have several provisions that will apply to government contractors, including enforcement pressure if companies don’t go along.
Along with rolling back executive orders that date back to Lyndon Johnson's presidency, the White House is also suspending enforcement activities at the Labor Department’s Office of Federal Contract Compliance Programs.
In a Thursday Sam.gov notice, the General Services Administration told agencies to suspend enforcement of DEI provisions in federal contracts.
Contractors also are being told not to consider race, color, sex, religion or national origin in their employment and procurement practices.
This pressure on contractors is part of the Trump administration’s desire to eliminate DEI activities throughout both the private sector and government agencies.
The executive orders encourage agency employees and contractors to report on DEI activities that violate the EOs.
The Ending Illegal Discrimination and Restoring Merit-based Opportunity order includes a provision that ties compliance with the orders to contractor payments. This potentially opens contractors to whistleblower claims under the False Claims Act, through which a whistleblower can get up to 30% of the monetary value of a settlement.
That order also requires agencies to identify up to nine civil compliance investigations involving companies, nonprofits and foundations with assets worth $500 million or more.
On the agency side, new leadership at the Office of Personnel Management is telling employees to report on other employees who try to obscure DEI efforts. Failure to report within 10 days could result in discipline.
Given the threats of enforcement, what will the real impact be on government contractors?
Most are taking a wait and see approach. Craig Saperstein, an attorney at the law firm Pillsbury Winthrop Shaw Pittman, said companies should be reviewing policies and talking to their legal counsel.
“This is a pretty sweeping executive order, and it's something that whether you're a company, whether you're a nonprofit, whether you're a college or university, you need to be taking a look at your policies,” Saperstein said during a Thursday session of the firm’s DC Disrupted webinar series.
As authoritative as the executive orders read, they do not immediately wipe away programs that encourage contracting with minority-owned firms. The 8(a) program, for example, was established by legislation and would take an act of Congress to abolish.
The executive orders don’t mention changing the mission of Small Business Administration.
“The SBA program’s core legal foundation remains intact, focusing on helping disadvantaged businesses, regardless of DEI policies," Robb Wong, a former SBA official and now an industry consultant, wrote on LinkedIn.
A second way to see the anti-DEI orders is part of a trend of continuing push back on program and practices that favor minority groups.
“This is a big topic that I don’t see going away anytime soon,” one industry executive told us on background.
Small business programs favoring minority owned business have been under fire in recent years and the courts forced the Small Business Administration to change how it certified businesses as disadvantage.
Agencies may pull back on contracting with minority-owned businesses in the short term to wait until the court challenges to the executive orders bring some clarity, a second executive said.
A third executive we spoke to doubts contractors will stop recruiting a diverse workforce because they have seen too much value in that practice.
“Good companies pay attention to their population and the potential biases,” that executive said. “If someone believes they no longer need to target different centers of talent, such as [Historically Black Colleges and Universities] that would be foolish.”
Companies don’t recruit at HBCUs to find Black employees.
“You go there to ensure that you are fishing in all ponds for talent,” the third executive added.
The impact on subcontracting and teaming is another open question.
“So long as companies are required to have subcontracting plans with small or 8(a) type set aside requirements, they will continue to contract with minority businesses,” one legal observer told us. “But if it leads into the elimination of these programs, it will impact the level of partnering with these businesses.”
But that observer added it is hard to imagine Congress wholesale abolishing minority business programs because it supports too many of constituents in their districts.
Company culture and leadership also can play a role, a fourth executive said.
Some leaders see DEI as part of their mission. Others will jump on the anti-DEI bandwagon. Then there are those who will balance anti-DEI pressures with what their company needs.
If done correctly, hiring and promotions are color-blind and based on merit and ability.
“But not everyone does it right,” the fourth executive added. “For me, being able to defend choices transparently, always seemed to prevail.”